EUR/USD Moves Lower Ahead Of ECB Interest Rate Decision

Euro Is Losing Ground Against U.S. Dollar

EUR/USD is currently trying to settle back below 1.1300 while U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index is testing the 20 EMA at 96.10. In case this test is successful, the U.S. Dollar Index will gain additional upside momentum and head towards the resistance at 96.25 which will be bearish for EUR/USD.

Yesterday, EU reported that Euro Area Inflation Rate increased by 0.3% month-over-month in January compared to analyst consensus of -0.3%. On a year-over-year basis, Euro Area Inflation Rate grew by 5.1% compared to analyst consensus of 4.4%. Euro Area Core Inflation Rate increased by 2.3% year-over-year.

Today, foreign exchange market traders will take a look at the final reading of Euro Area Services PMI report for January which is expected to show that Euro Area Services PMI declined from 53.1 in December to 51.2 in January.

Euro Area Producer Prices report is projected to show that Euro Area Producer Prices increased by 2.8% month-over-month in December. On a year-over-year basis, Producer Prices are projected to grow by as much as 26.1%!

It will be interesting to see whether Inflation Rate and Producer Prices data will have any impact on the dovish ECB, which will announce its Interest Rate Decision today.

Higher-than-expected Inflation Rate provided support to euro, but ECB commentary will serve as the key catalyst which will determine EUR/USD trajectory for the upcoming trading sessions.

Technical Analysis

EUR/USD is testing the support level at 1.1300. In case this test is successful, EUR/USD will get to the test of the next support level at the 20 EMA at 1.1285.

A move below the 20 EMA will open the way to the test of the support at 1.1270. In case EUR/USD declines below this level, it will move towards the support at 1.1230.

On the upside, EUR/USD needs to get back above 1.1300 to have a chance to gain upside momentum in the near term. The next resistance level for EUR/USD is located at the 50 EMA near 1.1325.

In case EUR/USD manages to settle above the 50 EMA, it will head towards the resistance at 1.1350. A successful test of this level will push EUR/USD towards 1.1370.

For a look at all of today’s economic events, check out our economic calendar.